Welcome to Yield Report

Interest rate commentary for 11 July – 15 July 2016

Yields rose around the globe last week and Australia was no exception. Markets were somewhat calmer about the post-Brexit world and this was expressed in terms of higher yields and higher equity markets. Global bond yields rose although in some markets they became less negative!

Close Week
Cash Rate%   1.75
90d Bank Bill%   1.96   -0.01     1.97      1.96
Aust 3y Bond%*   1.52    0.06     1.57      1.46
Aust 10y Bond%*   1.99    0.09     2.05      1.88
Aust 20y  Bond%*   2.47    0.08     2.50      2.38
US 2y Bond%   0.67    0.07     0.69      0.65
US 10y Bond%   1.55    0.19     1.55      1.43
US 30y Bond%   2.26    0.16     2.26      2.14
iTraxx 109.9   -15.6   119.5    109.9
$1AUD/US¢  75.63   -0.06   76.76    75.22
* Implied yields from Sept 2016 futures

Australian government bond yields were higher as business conditions and confidence improved. Activity in the semi-government bond market picked up with both QTC and SAFA announcing or completing transactions. Spreads to government bonds were mostly narrower.

This week saw cash rate markets re-trace some of their post-Brexit lows but markets are still factoring in at least one rate cut this year. See our chart which tracks what the markets are factoring in.

Term deposit rates have remained remarkably steady despite a lower official rate. APRA wants banks to fund loans with term deposits so competition among the banks for funds has intensified. There are still attractive yields to be had and our comprehensive tables outline the latest offers on terms between 1 month and 5 years.

The big movements in corporate bond markets this week were seen in the price of credit default swaps. CDS are a bellwether sign of investor sentiment and this week saw the biggest move for a considerable period. In debt issuance the absolute number of issuers coming to the market increased, although the size of the transactions was down.

Recently-issued hybrids had another good week, as did most securities in this sector. Our key story this week asks whether the market has run too hard too quickly and hybrid yields are too low compared to share dividends. Our yield tables and charts in the Hybrids and Notes sections provide a valuable tool for readers to sort the wheat from the chaff.

We hope you enjoy reading this week’s YieldReport.

June 2016 monthly interest rate commentary

Bond returns were again tremendous in June, adding to the best 6 monthly returns seen in 20 years. Bonds around the globe hit record lows and every Japanese bond out to 40 years was sitting below 0.10% and most had a negative interest rate. German and US bonds made new lows as did Australian 10 year bonds which fell below 2.00% for the first time.

The UK EU vote was the event which everyone knew was coming but few countenanced the “Leave” camp would actually win the vote. It was said that the UK government had not even prepared a plan for Brexit, so confident it was of the “Remain” vote winning. Expert after expert lined up to scare voters about the doomsday scenarios which would occur should the UK vote to leave…..Click here to read more

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YieldReport provides Australia’s only independent analysis of the interest rate markets and interest rate securities. Access to our site and regular email updates is free and only requires registration.

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YieldReport provides a weekly and monthly report on:

Cash Accounts Compare the top cash account rates and monitor wholesale market movements and expectations on future cash rates
Term Deposits Instantly compare over 470 term deposits. These are genuinely quoted rates and YieldReport does not receive any commissions or fees for providing the data
Bonds Get pricing data on government and corporate bonds, news and commentary on market movements, the prices for the latest debt issues and more
Hybrids Compare hybrid issues, review the latest pricing and receive notification of upcoming new issues
Managed Funds Compare dozens of managed Australian and international bond funds and ETFs


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The vast majority of fixed interest securities are not traded on a public exchange hence pricing is opaque at best. In addition, fees are included in quoted prices and rarely disclosed. Most investors are at an information disadvantage to market dealers and this is likely to cost an investor money.